FedEx has 'lucrative backdoor' to bigger role in e-commerce, says Citi

FedEx Corp can boost its profit by $1 billion annually if the delivery giant leverages its ShopRunner buyout and its partnership with Microsoft to deepen its e-commerce presence and cater directly to customers, Citigroup analysts said on Monday.

The brokerage's report, which also said the company could nearly double its share price in four years from current levels, comes as FedEx struggles with slowing growth after a pandemic-fueled surge in online shipments.

"FedEx could become ecommerce's universal shopping cart by augmenting ShopRunner's hundreds of merchant partners to thousands, and building a base of millions of subscribers that would get free expedited shipping," Citigroup analyst Christian Wetherbee said on Monday.

Memphis, Tennessee-based FedEx acquired e-commerce platform ShopRunner in 2020, while entering into a partnership with Microsoft Corp earlier this year.

"By leveraging ShopRunner assets through incremental technology investments with its partner Microsoft, we think FedEx can make itself a bigger part of the checkout process, increasing its role in the ecommerce sales experience," the analyst said.

Wetherbee said currently consumers have little or no choice over which company delivers the products they have bought online.

In March, FedEx posted lower-than-expected quarterly earnings, hit by ongoing labor woes and the Omicron outbreak, and said second-half ground margins would miss internal targets. 

FedEx's shares were flat at about $208 in early trade on Monday. They have lost nearly 20% of their value this year, through Friday's close.